Families driven from New Orleans by the impending storm struggled to get back to their houses yesterday, only to find their way blocked by floodwaters covering much of the city's surrounding suburbs.

"It looks to me like the whole damn city is under water," one rescue worker told the Guardian, standing by a flooded freeway close to the city limits.

"That should be flowing the other way," said another, pointing to the 17th Street canal. New Orleans mayor Ray Nagin said there had been reports of more than 20 buildings collapsing in the city, while offshore at least two oil rigs were adrift in the Gulf of Mexico. The weather knocked out power to about 1.3 million people in Louisiana, Mississippi, Alabama and Florida, and analysts estimated the damage could top $26bn (£14.4bn).

Residents were asked to stay away from New Orleans and the state governor Kathleen Blanco said she had ordered police to block re-entry routes to all but emergency workers.

Ivor van Heerden, director of the Centre for the Study of Public Health Impacts of Hurricanes in Baton Rouge, told CNN that people should stay away from the city for at least a week. "If you came back, you would be coming literally to a wilderness," he said.

"If your house is gone, it's gone. If you come back in a day or a week, it's not going to make any difference."

But by 4pm local time dozens of cars were parked next to the flood waters, with passengers trying to find a way to get back into the city. Rain had died down but strong gusts still whipped the residents gazing towards the New Orleans skyline across the floodwaters to the south-east.

"Man, I have never seen anything like this before," said Ken Porter, 46, who was trying to make his way back to his home along the lake shore. "I was just a kid when [Hurricane] Betsy came through but that wasn't anything as bad as this. It's going to be days before this water gets out of here."

Many had been driven to return home because of the impossibility of finding accommodation elsewhere. Tomesha Carter, 35, had been with her husband, Bruce, 32, and children Bryce, five, and Bruce, 18 months, on the road for 24 hours. "We left here yesterday and we drove for nine hours. We got as far as Orange in Texas but we weren't able to get a hotel room anywhere.

"We slept in the truck last night but we didn't know what to do, so we thought we had to head back here."

Felix Saland, 39, a truck driver from the St Bernard district, said: "I've never seen it this bad."

He had slept in a car-wash the previous night after driving as far as Mississippi without being able to find a place to stay. "I have got no idea what we're going to be able to do," he said. "From the look of it it's going to be a few days before we can even think of going home."

Asked how much of the city was under water, police officer WC Johnson said: "All of it." In places, he had seen floodwaters up to 10ft.

Hurricane Katrina was billed as a biblical storm as it roared towards New Orleans from the Gulf of Mexico, and it prompted an exodus of biblical proportions.

Residents piled into cars, trucks and trains as well as aeroplanes, before howling winds and driving rain shut the airport.

For most of the hundreds of thousands of people fleeing Katrina, their fate was an endless caravan of vehicles crawling at a snail's pace through Baton Rouge, Louisiana's capital, about 80 miles west of New Orleans - a traditional staging post for people fleeing hurricanes.

Along Interstate 10, the main route west, hotels were packed all the way to Houston, Texas, more than 300 miles away.

As winds roared into Baton Rouge yesterday, an estimated 3,000 people were sheltering in the city's emergency facilities. Tens of thousands more were staying with relatives and friends in the town.

A steady stream of people were arriving yesterday morning at the emergency evacuation centre set up at Tara high school on the outskirts of Baton Rouge. But it was already full to bursting. "There's nothing we can do," said Steve Jaros, a Red Cross volunteer at the shelter. "We're full, so we just have to send them farther on up the road.

The evacuation was not without casualties. Three New Orleans nursing home residents died on Sunday after being taken by bus to a Baton Rouge church.